With insurers and reinsurers still bracing for potentially historic aviation losses from the conflict between Russia and Ukraine, reports suggest that aircraft lessors are already seeing huge hikes in the cost of their coverage.
Quoting the Chief Executive of major lessor BOC Aviation Ltd this week, Reuters has reported that aviation firms may have to completely rethink how they approach insurance.
“Because there are going to be huge claims on these insurances this year for confiscation or theft if the aircraft aren’t given back, this will then have a knock on effect on insurance costs,” Robert Martin told an aviation conference yesterday.
“This is one of the unforeseen circumstances that is going to hit us later this year and I’m hearing some horrendous numbers for some of the near term renewals due at the end of March. We fortunately don’t go until January next year.”
There has been much speculation in the re/insurance market about the scale of aviation losses that could be incurred if Russia is able to move ahead with its plans to nationalize some 500+ Western planes that were leased to Russian airlines at the outbreak of war.
Analysts at S&P Global Ratings believe that a worst-case aviation loss for re/insurers could be as high as $15 billion, with the potential for another $20 billion of losses to develop on other specialty business related to the conflict, and more on cyber lines.
BOC’s net book value for its total 17 aircraft stranded in Russia at the outbreak of war is $589 million, or 2.5% of its total assets, the company has confirmed.
Meanwhile, the world’s largest aircraft lessor, AerCap, has submitted a $3.5 billion insurance claim for more than 100 jets stuck in Russia, Reuters reports.
“We will continue to gradually take the other aircraft out. The only way is by negotiation, there is no magic wand, and I feel sorry for our Russian customers, they’ve been put in this situation not because of something they’ve done,” Martin explained. “Whatever doesn’t get resolved will end up in an insurance claim.”